AFIP moves to keep Despegar shut

The AFIP tax bureau is doubling down in its offensive against Despegar.com, appealing the preliminary injunction that allowed Latin America’s largest online travel agency to continue operating on Wednesday and sending information on its tax fraud investigation to US regulatory authorities and all the countries in which the company has activity.

In addition to appealing the preliminary injunction, the AFIP yesterday also requested the courts to shut down the company’s website in order to suspend all its transactions. At press time, the website continued to be operating and still offered plane tickets, hotel reservations and car rentals even though its taxpayer identification number (CUIT) has been suspended.

The AFIP yesterday sent letters to the US Securities and Exchange Commission (SEC) and to the US Embassy in Argentina with details of the investigation, sources close to the judicial case told the Herald.

The tax bureau also sent the information to all the tax bureaus of the countries where Despegar.com operates so they can start their own investigations.

“The premeditated tax fraud carried out by the Argentine branch of the company consists on issuing bills for the services it provided in Argentina through the company Despegar.com located in Delaware, with the objective of not paying revenue tax,” said the letter sent by AFIP. By having its CUIT blocked, Despegar.com is not authorized to carry on any transactions but yesterday its website purchases could be carried out as the Herald verified.

Nevertheless, that could come to an end today if Judge Jorge Angel Brugo authorizes AFIP’s request to shut down the company’s website.

Attempts to reach Despegar.com for comment were unsuccesful.

AFIP’s aggressive targeting of the company came a day after Despegar.com’s local operations on Wednesday over allegations it used its office in the US state of Delaware to evade Argentine profit taxes.

According to the AFIP, the company had five billion pesos worth of transactions but the figure it reported to the AFIP was 10 times lower — 500 million pesos. The firm reportedly used its US office to avoid paying taxes in Argentina for the last five years.

Nevertheless, lawyers representing the firm — which employs around 1,000 people, most of whom are in Argentina — were successful in obtaining a preliminary injunction with the Buenos Aires City courts, with its management taking the opportunity in a subsequent press release to label AFIP’s decision “an act of bad faith.”

“After the closure, we went to the courts to revert the measure. They granted us an injunction and ordered AFIP to reinstate our CUIT number. We are now waiting for the AFIP to fulfill the judge’s order that will allow us to sell our products again,” Despegar said yesterday in a letter published in it’s website. “Those who made a purchase can fulfill their trips normally since this situation only affects the sale of new products.”

The company reassured it has paid “all taxes” and has “no debts or pending claims” with the AFIP. At the same time, Despegar said it has been audited since its creation by “leading companies” and “has never been blamed of tax evasion” before the current investigation.

“It’s not the first time we have been under a rigorous investigation by the AFIP. We have always collaborated with them by providing all the requested information. We hope AFIP will conclude we have abided by the current regulations,” Despegar said. “We have high-profile investors and neither them nor us would allow our actions to be less than the ones expected for a world-class company such as Despegar.”

The investigation

The judicial investigation into the financial operations of Despegar.com in Argentina began in April 2013, presided over by judge Javier López Biscayart. The investigation began when some local taxpayers wanting to lodge judicial complaints for the 35-percent profit tax charged on overseas travel-related purchases were unable to obtain documentation from the company proving the profit tax had been paid.

More than 100 claims from customers had been presented by AFIP at the judiciary as proof for the investigation, sources told the Herald.

The case notes that the founders of the company, Cristián Vilate and Alejandro Tamer, sold their stake when the investigation began in 2013: 97 percent to US-based Despegar.com Inc — whose owner has no financial capacity — and the remaining three percent to Argentine firm LA Inc SA, comprised of a sole trader and Despegar Online SRL, which has no declared assets with AFIP.

Despegar.com was founded in 1999 in Argentina, and has grown to become the largest travel agent in the region and one of the fifth largest in the world. It sells flights, hotels and travel-related services in 12 countries, the majority Latin American. Roberto Souviron is the current CEO of Despegar.com Inc, Federico Fuchs is the Chief Financial Officer and Erica Imoto Saito is the Marketing Director, according to Bloomberg.